Recently, I attended the Smart Energy America Conference in Boston. My goal was to get a better understanding of the prospects of battery backup systems, especially in conjunction with solar systems. As many know, battery backup and energy storage has been a hot topic in recent years. I’ve been heavily involved in the industry for years, being certified as an Outback and Sonnen designer and installer, and I have traveled abroad performing energy storage installations.

If you had called Rayah Solar a year ago inquiring about a battery backup, the conversation probably went something like this: “Battery backup is great, and I love it, but the truth is, you will spend about twice as much on a battery backup system as you would a natural gas or diesel backup generator.” So has that changed? Has my expert opinion changed? Perhaps, and I will explain.

From what I saw at the Smart Energy America Conference, hosted by Sonnen Batterie, batteries are already being used in residential, commercial and utility scale projects. And based on the application, there are some very practical and/or cost saving applications for batteries. First off, it is important to understand there are three distinct categories of power projects – residential, commercial and utility. I am going to briefly outlay each category and our current and future prospects of energy storage and battery backup applications. For each category, I will ask and answer two questions:

1) Are batteries currently a viable solution?

2) Should you wait or act now?

Before I get into the different categories, I do want to explain the differences between an energy storage and a battery backup. A battery backup is simply a battery system that will power selected loads in the case of a power outage. I am giving energy storage a broader definition to mean the use of batteries to cogenerate electricity, in a programmable methodology. These differences will become evident as I depict different scenarios. Let’s start with utility scale applications.

Utility Scale Applications

While this is probably the least discussed around kitchen tables, it may be the most critical to the future of our power grids. You have to realize that our power grids were designed over 50 years ago. They are old and definitely not smart. Do you remember the 2003 blackout that affected much of the northeast, from Canada down to Pennsylvania? Basically, because of a lack of 600 MW of power, there was a cascade of failures up and down the eastern seaboard. Please keep in mind that Massachusetts was not affected by this blackout because we are not in that grid region. A modern grid, a Smart Grid, could have isolated the failures, or even prevented the failure. This is where batteries come in. On a utility scale, batteries can serve two humongous purposes:

1) Stabilization of the grid

2) Storage of solar energy

On the former point, stabilization of the grid, if we had standby battery banks systematically distributed along the grid when peak power demand calls for more power, the batteries would have an instant supply of power to offset the peak demand. They can later be charged and ready for when they are needed again. This would have single handedly prevented the 2003 blackout. On the latter point, solar power plants are great at supplementing the grid with power, but as we all know, they don’t work at night. Batteries would solve this problem. So, is the technology there to support these applications? The answer is a resounding, YES. Not only does the technology exist, but it is already happening all over the world. The question then is, is it cost effective, and if so, should we wait until prices come down? Since utility scale battery projects are happening all over the world, there is financial feasibility. The fact is that the grid needs to be smartened up, and we need it now. So even if the technology is better or cheaper in future years, it is still viable and needed right away.

For Utility Scale Projects:

1) Are batteries currently a viable solution? Yes

2) Should you wait or act now? Act now

Commercial Applications

In general, in first world countries like the US, with commercial buildings, energy storage for and battery backup applications have limited practical uses. However, when those uses are practical, batteries can save companies thousands, if not millions of dollars. I will list these applications:

1) To offset Demand Charges

2) Utility Demand Programs

3) Sensitive Emergency Power Backup

There may be other practical applications, but we will start here and there is no better place to start than Demand charges. Honestly, Demand charges are sneaky and excruciatingly painful. If you own a manufacturing facility, shop, or any business that uses a lot of power, you may be subject to Demand charges. Basically, a Demand charge is a one time rate based on your highest 15-minute interval of power during an entire month. So for example, if one morning, a shop turns a bunch of machines on at the same time, then the electric company will bill them at that high rate for an entire month. Another example would be a large box store like Costco. Let’s say their average demand is about 10 kW, but on a very hot summer day, they use 25 kW during the peak heat of the day. They will get charged at 25 kW at the demand rate for that entire month. If you are a business owner, CFO or manage a facility, you know exactly what I’m talking about, and I’m sure, you find this excruciating. The problem with solar is that while it may be able to curtail peak demand most of the time, solar may not always be available in the quantities you need when you need it. Remember, all it takes is 15 minutes to get stuck with a high demand bill. In some states like California, Demand charges can be up to $45 per kW. So in the case of the Costco that used 25 kW only once all month, they would have to pay $1,125 just for Demand, and that is not including Supply or other normal charges on their electric bill. As you can imagine, that can really hurt the bottom line for many businesses.

This is where a smart energy storage system could be well worth the money. As clearly evidenced at the Smart Energy America Conference, we clearly have both the technology, hardware, software and expertise to design and install energy storage systems that can anticipate and catch these peak demand times and help reduce demand. In the Costco example above, the energy storage system would be programmed to send power from the batteries whenever the warehouse’s demand spiked. So instead of pulling that excess power from the grid, it would pull it from the batteries. If the battery system could maintain a level 10 kW, that would reduce their Demand bill from $1,125 to $450 a month, saving them about 60% on their bill. That would be a savings of over $5,000 a year.

Utility demand programs basically incentivize a battery storage system to send power to the grid when the grid needs power. For example, when everyone turns on their AC’s on a hot day, the grid may need power. In some states, the utility will pay you to discharge your batteries into the grid. The neat thing about this is that new battery systems are so sophisticated, that we can set up a signal between the battery bank and the grid, so anytime the grid needs the power, the batteries can automatically deliver the power.

Lastly, commercial battery backup is practically essential if you have sensitive equipment that needs a constant uninterrupted power supply. A good example of this is the super magnet used at MRI facilities. If that magnet looses power for even a second, it would permanently fail. This would be a VERY, VERY expensive proposition. So a battery backup system that can instantaneously re-establish power is a true no-brainer.

For Commercial Scale Projects:

1) Are batteries currently a viable solution? Yes

2) Should you wait or act now? Now, but I would limit it to only three circumstances, where you have a) high demand charges b) sensitive equipment and c) if you are in a region where the power supply is intermittent.

Residential Battery Backup and Energy Storage

I really try to make this one short and sweet. Using batteries solely as a backup method for power does not currently make sense. If you are only going to use them a couple days a year on average, you could get a Generac generator for a lot less money. However, there has been a big change in the technology around batteries, and I would not view batteries primarily as a backup, but rather as a component in an energy system. A solar system by itself can not operate during a power outage. But with batteries, it can. As many people have come to find out, the economics of a solar system is fantastic, so many many people are racing to put solar panels on their house. With recent integrations between solar and battery systems, the two systems are designed to work together when the grid is operating and when the grid is down. That means the batteries are not just a backup but are actually used every day.

But does the economics work? Yes… kinda… maybe. Let me ask you this, how much does peace of mind cost? If you like the idea of being able to run your house normally, or at least semi-normally without having to worry about fuel for a generator than I absolutely think the math pencils out for an energy storage system for your home. Also, based on your utility and their net metering rates, a battery system may be the only economical way to go solar. For example, if your town’s retail electric rate is $.21 and they will only give you $.10 on your excess solar power, it may be much more cost effective to send all that excess power to a battery bank and then use it during the night.

But what about pricing, won’t the prices of batteries go down over the next few years? I actually do think the prices on batteries will go down over the next few years, but there is something huge, a 30% Federal Tax Credit. Even if battery prices go down 10% in the next few years, that will not equal the current 30% Federal Tax Credit. This actually a mixed blessing for many of us, including myself. Honestly, I did not consider batteries when I got solar panels for my house. And based on IRS tax code, you can not use the 30% renewable energy tax credit twice. So it’s much better to install a battery storage system when you go solar, rather than an afterthought.

For Residential Scale Projects:

1) Are batteries currently a viable solution? Yes, but under the right circumstances.

2) Should you wait or act now? If you currently do not have solar panels and are contemplating a solar system, I would suggest looking into a battery storage system. This is definitely true under the following circumstances:

You are designing a large solar system and will not get full net metering credits

You see both the importance and viability of having a backup power system that is designed to work with your solar system. This is a question less about cost, and more about true household power independence.

If you are in a utility with time-of-use charges.

If you already have a solar system and are thinking about batteries, I would love to design a system for you. However, if you have already used your 30% Federal Tax Credit, are getting 1 to 1 net metering and you don’t see the importance of a backup system that is tied to your solar panels, then it might be worth waiting. However, with current advances in battery technology, especially lower manufacturing costs, this too may be practical within a short period of time. I’ll keep you updated!